ECO 550 – New (Strayer) Assignment 1: Demand Estimation
Due Week 3 and worth 200 points
Imagine that you work for the maker of a leading brand of low-calorie microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.
For a refresher on independent and dependent variables, please go to Sophias Website and review the Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independentand-dependent-variables–3.
Note:Your professor will provide you with the equation and data necessary for you to complete this assignment. You will find this information attached to Assignment 1 within the course shell.
Write a four to six (4-6) page paper in which you:
1. Compute the elasticities for each independent variable. Note:Write down all of your calculations.
2. Determine the implications for each of the computed elasticities for the business in terms of shortterm and long-term pricing strategies. Provide a rationale in which you cite your results.
3. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.